Ninety-two percent of these advisors use mutual funds to hold an average of 46% of client assets, which is substantially greater than theaverage allocationsto other types of investments, according to a recent survey conducted by Financial Research Corporation (FRC) in itsinvestigation of the advisory practices of members of the FinancialPlanningAssociation (FPA).
Further, the study of 653 FPA-affiliated advisors found widespread interest in products such as separately managed accounts and exchange-traded funds. “For planning-oriented advisors, it’s less about the particular type of investment vehicle and more about what’s the best way to move the client toward his or her goals,” said D. Christopher Brown,theindustry consultant who authored the study on behalf of FRC.
“At the same time, however, a lot of planners are recognizing the unique role that products like separately managed accounts and ETFs can play in filling out a client’s portfolio. Planners are increasingly adopting a ‘core-and-satellite’ approach to portfolio construction. There are variations on the theme, but this often entails a core allocation of mutual funds and ETFs-maybe 40% to 60% of the portfolio-complemented by one or more separately managed accounts or specialty mutual funds, depending on the size of the portfolio,” said Brown.